If video killed the radio star, can video on demand kill newspaper classified ads?
Consider Time Warner Cable’s system in Austin, Texas, where four vertical classified ad channels on the system’s VOD platform have this year helped quadruple the ad revenue that the system took in for all of 2004, says Pamela Power, vice president and general manager of ad sales for Time Warner Cable Media Sales in Austin.
“We see significant revenue increases in this category in ’05,” she says, “and much greater increases in ’06 as people grasp the product and learn how to best use it.”
Classified ad channels are not new, but with the advent of VOD, they are being repackaged in novel ways to target local small businesses. Rather than selling individual items — like that classic Pontiac sitting in Uncle Sam’s garage — many tend to offer local advertisers longform advertising opportunities to give more general information about products and services. Systems that have launched the classified channels on VOD say they increase local-advertiser retention. Additionally, they help push the VOD platform among digital subscribers, enticing viewers, getting them comfortable with VOD, and driving them to other on-demand content. That, in turn, is helping reduce digital churn.
“The more VOD ads we have, the more they feed on each other,” Power says, “and the more they drive interest in other [VOD offerings].”
Moreover, the channels increase operators’ competitive stance against direct-broadcast satellite by providing additional local content for subscribers that DBS can’t offer: “It’s a unique, distinct value proposition from satellite service or any other service in the marketplace,” says Joe Del Grasso, vice president and general manager of Comcast Spotlight, the MSO’s ad sales arm, in the Washington, D.C., region.
With the myriad ways that consumers now have to avoid commercials, the biggest surprise for Power and others who have launched VOD ad channels is the viewership levels.
“I don’t know why people sit and watch, but we know that they do, and I think it revolves around the concept that it’s permission marketing, not interruptive marketing,” says Billy Stewart, local sales manager for Insight Communications Co., Louisville, KY. That system recently ported a general-purpose local analog ad channel, Shopping Kentuckiana, to VOD. “People watch the channel when they aren’t watching something else. They’re saying, 'I give my permission to learn more about your business,’” Stewart adds.
Other operators that are capitalizing on the permission-marketing concept on VOD include:
- Cablevision Systems Corp., which late last year launched Optimum Auto on its New York-area system. With some 48,000 listings of new and used cars from over 300 area dealers, the channel had garnered about 2 million hits as of late March.
- Comcast Corp., which through its Comcast Spotlight unit, is preparing to port a five-year-old analog real-estate ad channel on its Richmond, Va., system over to VOD by the end of this year.
- Cox Communications Inc., which is rolling out its Free- Zone VOD advertising platform to 1.1 million Cox Digital Cable subscribers across eight systems. Originally launched in San Diego as a local ad channel, FreeZone is going national because Cox found the local advertising production costs to be too high, explains Mike Miller, regional vice president for Cox Media in Atlanta. The large players typically already have long-form video they can repurpose for the VOD platform, he says.
- Comcast, which is going nationwide with Dating on Demand, a project that launched initially in Philadelphia, where it has had over 1 million views since August. While it offers a certain VOD twist on personal classified ads, Comcast compares it instead to online dating services.
While Cox and Comcast have nationwide initiatives, most classified ad channels are being created on a system-by-system basis to target local small businesses. Such is the case at Time Warner in Austin.
The 300,000-subscriber system launched its first VOD ad channel, Homes@Home, which features local real estate and home-product video ads, in September 2003. Beep TV, an automotive ads channel, followed last June. In July, the system rolled out Austin OnDemand, which Power described as a “catch-all channel for anything Austin-related.” The fourth, healthcare-related OnDemand Health Solutions, debuted in November.
The four channels together average between 3,000 and 5,000 video ad downloads per month. “What we have found to be most effective is not pricing and product information, but more educational information,” Power says. For example, a video ad on how to finance a new home posted by a local realtor was downloaded more than 1,000 times in March alone.
The system promotes the channels through 30-second cross-channel spots, inserted on basic-cable networks, that tease the long-form video and point to the VOD channel as a destination for more information. The promo spots are compulsory components of the package sold to advertisers; without them, Power says, viewers are less likely to find the VOD offering.
Insight Media has adopted a similar practice for Shopping Kentuckiana, which features two-minute video interviews with local business owners about their shops and services; it doesn’t require the 30-second spot buy, but about 50% of advertisers use both the short spots and the long-form ads.
While VOD is the next big thing, analog classified channels continue to be revenue earners for local systems, particularly when tied to a Web site. For example, Insight supports its analog Shopping Kentuckiana channel with www.shoppingkentuckiana.com, where subscribers can browse and view the channel’s ads 24/7.
Real estate listings and related home products, auto sales and, to a lesser extent, employment and recruiting are the most popular advertising categories on analog channels. Local systems have employed a variety of programming models for the channels, ranging from 30-minute hosted programs that showcase several advertisers within a specific category to continuous, repeating loops of ads from individual advertisers that are 30 seconds to two minutes in length.
While the systems would not divulge revenue figures, they say the year-to-year growth has sustained the analog channels. In Richmond, Va., for example, the Richmond Real Estate channel has averaged year-to-year revenue growth of about 20%, “which is higher than our average overall spot growth,” says Linda Johnson, the system’s sales director. Advertiser retention has averaged about 80%, “and that’s very indicative of the success our advertisers have had,” she adds.
While digital ad channels are certainly adding sizzle, some systems place a high value on analog ad services — as evidenced by their low channel placement. For example, Time Warner Cable Media Sales in upstate New York has given its TWTV channel — which is heavy with real estate and auto advertising — the choice channel 7 position in Albany, NY, for eight years running. The system is in the process of converting channel 13 to classified ads as well, says Joe Noonan, regional vice president for the northeast.
Maybe classified ad channels won’t kill the newspaper classified business, but it’s clear that they have plenty of classy upside for cable systems.